The discussions could also cover Caterpillar’s remanufacturing business (Cat Reman) that refurbishes and restores used machinery and technologies to their original condition and specifications, said a person with knowledge of the negotiations.
Executives of both firms declined to comment. “Normally, we do not comment on a potential joint venture,” said M&M automotive division president Pawan Goenka.
“As a large global company, Caterpillar is regularly discussing a variety of business opportunities with other companies around the world. As a matter of policy, we do not respond to specific rumours or speculation,” said Caterpillar’s chief corporate spokesperson Jim Dugan.
A joint venture will make great business sense for both companies. For M&M, which already has engine-making capabilities, this would be a contiguous business. A joint venture will help it gain scale as well as a foothold in several overseas markets. For Caterpillar, a venture with M&M will offer it a great cost advantage globally. Caterpillar bought Hindustan Motors’ earth moving division almost a decade ago to form Caterpillar India.
But if a JV is set up, it will be a separate venture, and will have its own integrated manufacturing facility, said another person familiar with the development.
The $7-billion Mahindra group is the largest tractor and utility vehicle maker in India. It has also diversified into commercial vehicles with its Navistar partnership, and also has a two-wheeler division.
A $45-billion company, Caterpillar is the world’s leading maker of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Cat Reman is a high-technology, low-cost, global organisation that salvages facilities in the US, the UK, Europe, Mexico and China.
M&M’s American partner Navistar had entered into an alliance with Caterpillar recently. Last month, Navistar and Caterpillar announced their alliance that will produce Caterpillar heavy-duty vocational trucks for sale in North America. The alliance includes a 50:50 joint venture that will develop, manufacture and distribute commercial trucks in regions other than North America and India.
Markets for the joint venture’s products include Australia, Brazil, China, Russia, South Africa and Turkey. The first products are expected to be available as early as the third quarter of 2009.
